perhaps, but from Reuters it sure looks like there is a lot of there there. Their est. earning number keeps dropping by the bucket full and while debt/equity is not horrible it ain't great. IF div. needs to be reduced in the coming terms that will really send a red flag. Sometimes a lot of news is priced in but many times the first big day drop and slight rebound from low represent last good time to bail out. Remember when INTC dropped a truckload one day on bad news to 20 that was 26% ago and boy oh boy was that 'all priced in prev.'?
Reuters Business Report
Duke Cuts Earns Estimates, Warns on 2003
Friday September 20, 4:32 pm ET
By Janet McGurty
NEW YORK (Reuters) - U.S. power giant Duke Energy Inc. (NYSE:DUK - News) on Friday cut its 2002 earnings estimate and said it would take a third-quarter charge for deferring construction of three power plants due to depressed conditions in the nonregulated power sector.
Shares of Duke, already battered by investigations into trading practices and the collapse of wholesale power prices, closed down $1.02, or 4.76 percent, at $20.40 in Friday trade on the New York Stock Exchange.
Charlotte, North Carolina-based Duke said it expected to earn between $1.95 and $2.05 per share in 2002, excluding charges. In July, the company estimated a range of $2.45 to $2.55. Analysts' estimates provided by Thomson First Call ranged from $2.35 to $2.60, with a mean of $2.46.
Looking ahead, the company warned that if the North American merchant energy market does not improve, earnings may decline in 2003. First Call estimates for 2003 range from $2.20 to $2.78, with the consensus of $2.46.
Duke, whose regulated power utilities provide power to 2 million customers in the Carolinas, had looked to the nonregulated merchant power for growth. But the prolonged economic downturn, the collapse of wholesale power prices, and decreased market liquidity have cut growth for the whole sector.
"They have benefited in the past due to the strong merchant sector, and now they are taking it on the chin. Although they are much better positioned than other companies in the sector, they have considerable challenges ahead," said Paul Patterson, independent energy analyst.
A TOUGH SECTOR
Although Duke vied for market share of unregulated power trade with top-tier rivals Dynegy Inc. (NYSE:DYN - News), Williams Cos. Inc. (NYSE:WMB - News), Mirant Corp. (NYSE:MIR - News), and Enron Corp. (Other OTC:ENRNQ.PK - News), they seem better positioned than these rivals because they have their regulated power and pipeline business to fall back on.
Since the beginning of the year, Duke's shares have fallen about 45 percent, underperforming the broader Standard & Poor's utility index which dropped 33 percent. At the same time, shares of other companies with large trading operations have fallen more, with Dynegy down 95 percent, Williams down 91 percent, and Mirant off 84 percent.
Duke told analysts on a conference call it expected earnings growth in its natural gas business to be between 7 and 9 percent and its power utility business to be "stable."
In 2001, Duke said its natural gas transmission segment earnings were $608 million while its earnings before interest and taxes from franchised electric was $1.6 billion. Earnings from its merchant generation were $1.4 billion.
The company confirmed it was deferring the construction of three new power plants until market conditions improve and will result in a one-time, pretax charge of between $250 million and $300 million, or 19 cents to 23 cents per share, to be taken in the third quarter.
First Call estimates for the third-quarter range from 60 cents to $1.08, with a mean of $1.00. Last year, Duke earned $1.01 per share in the quarter.
Duke said it was deferring construction on a total of 2,420 megawatts. Plants on hold are its 620-megawatt Grays Harbor Energy Facility in Washington, the 1,200-megawatt Deming Energy Facility in New Mexico, and the 600-megawatt Moapa Energy Facility in Nevada.
In addition, the company said it was negotiating new terms for the purchase of turbines and associated equipment. This combined with the demobilization costs of construction deferrals and the write-off of site development costs at other sites would comprise the third-quarter pretax charge.
Duke also cut capital spending plans for 2002 from $6.8 billion to $6.2 billion, excluding the acquisition of Westcoast. The company also cut its 2003 capital spending to $3.5 billion.
In July, the company had reduced 2003 capital spending to between $4 billion, down from its traditional spending levels of between $6 billion and $8 billion. |
